Having lurked for a while on the forum I've finally got round to signing up. It's such a wonderful resource for bookkeepers and seems so friendly!
I'm working on a customers accounts who installs bathrooms. They entered a competition at a DIY store and won a free took kit. It included some expensive tools, hammer drill worth approx £300, mitre saw worth £250 etc. They have a value but since my client didn't pay for them how do I account for these assets in the books? Also do I need to depreciate them?
Assuming that it was a free to enter competition, that your client entered, and he is a sole trader, then I would enter them as fixed assets, using the value that they have new, and capital introduced.
What would the VAT treatment be on this transaction, as I have always thought that VAT can only be claimed on actual purchases made.
Also, what would be the position be if / when the asset was sold. Would the purchase value be zero (as this is what was actually paid) or the makret value of the asset?
Wouldnt expect would be any VAT on the goods as they havent been sold by the business that run the competition so the client wouldnt therefore be able to claim back any VAT as there is none to claim.
The purchase value doesnt matter when they are sold. What matters is how much they are sold for and what their value in the accounts is. The sales price would be matched with the value in the accounts to produce any gain/loss on disposal.
My own opinion is that they should be capitalised/expensed at market value.
